As China row smolders, Vietnam rethinks its business plans

Wed Aug 6, 2014 5:19pm EDT
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By Nguyen Phuong Linh

HANOI (Reuters) - A train from Vietnam's border with China pulls up at a station in Hanoi as dawn breaks, ready to unload goods for trade at what was for years the capital's most bustling wholesale market.

The freight load is smaller than it used to be, as is the crowd of traders awaiting its arrival. Chinese goods, they say, are increasingly unpopular among their customers now the two countries are locked in a bitter diplomatic row.

"No one buys Chinese products anymore," said Le Thang Loi, who runs a shop in Hanoi selling household goods. "I've switched over to sell Vietnamese and Thai things since last month."

Vietnam's testy but economically vital ties with its fellow communist neighbor have soured since early May, when Beijing moved a $1 billion oil rig unannounced into a stretch of the South China Sea that Hanoi claims is its exclusive economic zone. It prompted protests that degenerated into riots targeting Chinese factories in an unprecedented outpouring of anger.

The rig was moved on July 16, but the wounds are festering. The row has not only deepened mistrust of China, but increased awareness in Vietnam that its $171 billion economy is exposed, and at risk of being held hostage by Beijing at any time.

Over-dependency on trade with China will be hotly debated within the politburo of Vietnam's secretive Communist Party, experts say. Last week, 61 party members urged the Central Committee to take legal action against China and "escape" its grip, in a letter leaked from its usually discreet internal channels.

"The country is in danger but also facing a big opportunity to change," the group, which included ex-government advisors and a former ambassador to China, said in the letter seen by Reuters. "Missing this chance would be a crime on our nation."

Trade with Beijing was worth $50 billion last year and any interruption to that could badly hurt Vietnam, while inflicting little damage on China. Thirty percent of Vietnam's imports last year were from its neighbor, worth $37 billion, equivalent to just one percent of Beijing's total exports.   Continued...

Porters load bags of dried longan fruit onto a truck in preparation for export to China at  Dong Dang town, on the border with China, in Vietnam's northern Lang Son province July 30, 2014.  REUTERS/Kham